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FinancialTrendAnalysis

LTFP 2008

Objective AnumberoffinancialindicatorsareanalyzedutilizingtheInternationalCityManagement Associations(ICMA)guidelinescontainedinEvaluatingFinancialCondition.Theanalysisof theseindicatorsisdesignedtopresentinformationonthefiscalhealthoftheCityofSan ClementeaspartoftheLongTermFinancialPlan.Thisannualfinancialtrendanalysisfocuses ontheCity'sGeneralFund. Background The Citys financial trends are analyzed annually with many factors utilized in order to understandthefinancialconditionoftheCityofSanClemente.Thesefactorsinclude: TheeconomicconditionoftheCityandthesurroundingregion; Types and amounts of revenues and whether they are sufficient and the right mix to supportthepopulationasitcontinuestogrow; Expenditure levels and whether these expenditures are sufficient to provide the desired levelofservicescurrentlyandastheCitycontinuestogrow; FundbalancesanddebtlevelsandtheirimpactuponcurrentCityfinancialresources. This report examines these issues and others in determining the current financial condition of theCityofSanClemente.TheCitysadoptedfiscalpolicieshavebeenconsideredinconnection withthisanalysis. DatausedindevelopingthisfinancialtrendreportwasprimarilydrawnfromtheCitys ComprehensiveAnnualFinancialReportsforfiscalyears200203through200607. Consequently,alltrendsarebasedondataavailableasofJune30,2007,anddonot incorporateanychangesthathaveoccurredsincethattime. ExecutiveSummary ThefinancialtrendsthatfollowprovideCityCouncilandAdministrationwithinsightintothe overallfinancialpositionoftheCitybyanalyzingtheCitysGeneralFund.Thisanalysismakesit possibletoidentifyspecificareaswherenewpoliciesshouldbeimplementedorexistingones revised.Oneofthefollowingratingshasbeenassignedtoeachofthetwentyoneindicators:

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FinancialTrendAnalysis
Favorable(F):

LTFP 2008

This trend is positive with respect to the City's goals, policies, and nationalcriteria. Caution(C): This favorable rating indicates that a trend is in compliance with adopted fiscal policies or anticipated results. This indicator may changefromapositiveratinginthenearfuture. Warning(W): This rating indicates that a trend has changed from a positive direction and is going in a direction that may have an adverse effect on the City's financial condition. This rating is also used to indicate that, although a trend may appear to be favorable, it is not yet in conformancewiththeCitysadoptedfiscalpolicies. Unfavorable(U): Thistrendisnegative,andthereisanimmediateneedfortheCityto takecorrectiveaction. Asummaryoftheindicatorsanalyzedandtheratingassignedtoeachislistedbelow.Thepast tentrendreportsarepresentedandidentifystrengthsandweaknessesoftheCitysfinancial conditionandtoillustrateanypositiveornegativechanges.

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FinancialTrendAnalysis
Indicator RevenuesPerCapita PropertyTax Revenues PropertyValues ElasticRevenues SalesTaxRevenues License&Permit Revenues Comm.Develop. Charges Intergovernmental Revenues OneTimeRevenues RevenueOverage Population ExpendituresPer Capita ExpendituresBy Function EmployeesPer Capita FringeBenefits CapitalOutlay OperatingPosition Indicator DebtService AccumulatedComp. Absences FundBalance LiquidityRatio 08 F F F W F W W F F F F F F F F F F 08 F F F F 07 F/C F F F/C F F F/C F F F F F/C F F F F F 07 F F F F 06 F/C F F F F F/C F F F F F F F F F F F 06 F F F F 05 W F F F F F F F F F F F F/C F F/C F F 05 F F F F 04 W F F F F F F F F F F/C F F/C F F F F 04 F F F F 03 F F F F F F F F F F F F/C N/A F F F F/C 03 F F F F 02 F F F F F F F F F F F F N/A F F F F 02 F F/C F F 01 F F F F F F F F F F F F N/A F F F F 01 F F/C F F 00 F F F F F F F F F F F F N/A U F F F 00 F F/C F F

LTFP 2008

99 F F F F F F F F F F F F N/A U F F F 99 F F F F

OverviewoftheCitysFinancialCondition
The2008LongTermFinancialPlanincludestheanalysisoftwentyonetrends.Threeindicators receivedawarningrating.Noindicatorsreceivedanunfavorablerating.Intotal,thesecurrent yearresultsareadecreasefromtheprioryearwhenfourindicatorsreceivedcautionratings. However,becauseofthecommitmenttofinancialplanning,fundingofnecessaryreserves,and costreductionandstreamliningeffortsmadebymanyoftheCitysdepartmentstheCityhas

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FinancialTrendAnalysis

LTFP 2008

alreadytakentheinitiativetoanalyzethesewarningsignsandimprovethefiscalhealthofthe Cityforthefuture. Ratingchanges Therewerefivetrendchangesfromthelastfiscalyear,withtwoofthechangesinapositive directionandthreeinanegativedirection.ThepositivechangeswereinRevenuesperCapita andExpenditurespercapita,whichshowedimprovementfromlastyear.Thenegativechanges were: `ElasticRevenuesDowngradetoWarning License&PermitRevenuesDowngradetoWarning CommunityDevelopmentChargesDowngradetoWarning Ratingdiscussion ThethreeindicatorsattheWarninglevelreflecttheCitystransitionfromafastgrowing,high developmentareatoaCitythatisstabilizingitsgrowthasdevelopmentslows. RevenuesperCapitahaschangedfromafavorable/cautiontoafavorableratingforFY200607 asrevenuecontinuestogrow,populationgrowthhasslowedwithdevelopmentthroughoutthe City.TheslowdownindevelopmenthasstartedtoallowtheCitytaxrevenuestorealizethese populationandgrowthincreases. ExpendituresPerCapitachangedfromafavorable/cautionratingtoafavorableratingdueto expenditureskeepingupwiththegrowthoftheCity.However,theCityaspartofits developmentneedstocontinuetomonitortheeffectsofparkdevelopmentandoperational costs.AParkDepreciationpaperisincludedinthisyearslongtermfinancialplantopresent alternativestofundfuturecapitalandmaintenancecostsrelatedtoparkinfrastructure. Expendituresshouldcontinuetostabilizeinthefuture;ifnot,thiscouldsignalthattheCitys servicedemandshaveincreasedonapercapitabasisandthistrendmaybedowngraded. ElasticRevenuesaremadeupofsalestax,transientoccupancytaxes,andlicensesandpermits. TheserevenuesreceiveaWarningratingfollowingthethirdconsecutivedecreaseandthe secondyearbelowthehistoricalaverage.Althoughthetotalactualamountsforcommunity developmentservicechargesandlicensesandpermitsaregreaterthantheoriginalbudget amounts,thisdifferencewasstilllessthantheprioryear,duetotheCityapproachingbuildout andthedelayoftheMarbleheadCoastaldevelopment. LicensesandPermitsneedtobemonitoredonanongoingbasis.LicensesandPermitswere anticipatedtodecreaseinconstructionpermitsandinspectionfeesandtheserevenueswill continuetodecrease,exceptfortheMarbleheadCoastalrelatedactivity,infutureyears.This trendreceivesaWarningratingduetoacontinualdeclineindevelopmentandthedelayofthe MarbleheadCoastalproject. CommunityDevelopmentServiceChargesalsoreceivesawarningratingduetoadeclinein developmentastheCitynearsbuildoutandlevelingoutofservicecharges.

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FinancialTrendAnalysis

LTFP 2008

RevenueTrendAnalysis
ComparisonofRevenuesbySource FY200203vs.FY200607

Comments:Thesecharts,whichcomparecurrentrevenuesourcestothosefiveyearsago, showsignificantchangesintherevenuepercentagesbysourceforGeneralFundrevenuesin thePropertytax,Intergovernmental,ServicechargesandLicenseandPermitcategories. Propertytaxrevenuesincreasedfrom31%inFY200203to46%inFY200607duetoachange inpropertytaxlegislationthatstartedinthe200405fiscalyear,andincreasesinhousingprices

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FinancialTrendAnalysis

LTFP 2008

andnewdevelopmentintheCity.Thechangeinlegislationincreasedpropertytaxesby$4.9 millionanddecreasedtheCitysmotorvehiclelicensefeesbythesameamount,thereby decreasingtheintergovernmentalpercentagefrom9%in200203to2%in200607.(See RevenueandFeeAnalysisissuepaper.)Thedecreaseinlicensesandpermitsfrom10%in2002 03to6%in200607isduetodecliningconstructionpermitfeesasanticipated.Servicecharges decreasedfrom15%in200203to9%in200607duetolowerplanninginspectionfeesasa resultofslowingdevelopmentintheCity. RevenuesPerCapita

Finding:FAVORABLE.Revenuespercapitainbothchartsreflectanincreasewhenanalyzing actualamountsandconstantdollarsforFY200607.Thistrendhaschangedtofavorablefrom

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FinancialTrendAnalysis

LTFP 2008

afavorable/cautionratingintheprioryearasrevenuescontinuetogrowwhilethepopulation growthratehasslowed.Revenuespercapita,inactualdollars,experiencedgrowthfromFY 200506of7.16%(includingonetimerevenues)and7.92%(excludingonetimerevenues) relatedtoincreasesinactualpropertytaxrevenues.Inconstantdollarstheincreasewas6.67% (includingonetimerevenues)and7.31%(excludingonetimerevenues)duetotheactualdollar growthrateexceedinginflationgrowthof2.92%. Comments:Thefirstchartwhichincludesonetimerevenuesshowsanupwardtrendfrom $698to$748inactualdollarsandanincreasefrom$601to$641inconstantdollars.Total revenuesforFY200607increasedwiththeCitysmajorrevenuecategoryofpropertytaxes increasingby$2.5million.Thispropertytaxincreaseincludesthepropertytaxshiftofmotor vehiclefeesthatstartedinFY200405.Thisincreasedpropertytaxrevenuesby$1.0million fromtheFY200506withtotalERAFpropertytaxesof$4.9million.Theoverallincreasein revenuesfarexceededinflationgrowthduringthelastyear. Thesecondchart(whichexcludesonetimerevenues)showsanincreaseinactualdollarsfrom $682to$736fromFY200506andanincreaseinconstantdollarsfrom$588to$631.The approachofexcludingonetimerevenuesisarealisticapproachtoanalyzingrevenuessincethe Cityonlyappliesonetimerevenuesagainstonetimeexpenditures,includingreservetransfers, inaccordancewiththeCitysFiscalPolicy.GeneralFundrevenuesremainstable,andthe favorable/cautiontrendhasbeenchangedtofavorableduetorevenuesexceedinginflation growth.

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FinancialTrendAnalysis
PropertyTaxRevenues

LTFP 2008

Finding:FAVORABLE.PropertytaxrevenuesshowedasignificantincreaseforFY200607, continuingaverypositivetrend,asindicatedinthegraphabove. Comments:Propertytaxrevenuesincreasedby$2.6millionor12.4%inactualdollars,and increase11.8%inconstantdollarsendingtheyear$2.1millionabovethepriorfiscalyear.The actualdollarincreaseistheresultofanadditional$1.0millioninpropertytaxesreceivedinlieu ofmotorvehiclefeesand$1.6millionrelatedtonewhomesalesandincreasedproperty valuations.Thisindicatorreceivesafavorableratingfortheeleventhconsecutiveyear.

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FinancialTrendAnalysis
PropertyValues

LTFP 2008

Finding:FAVORABLE.Propertyvaluesshowedapositivegrowthratefortheeleventh consecutiveyearinFY200607. Comments:Thegrowthrateinpropertyvaluesasapercentageratefromthepreviousyearin actualdollarsshowsanincreaseof13.7%.Asaresultofthepositivechanges,thisindicator remainsfavorable.Thisindicatorwillcontinuetobecloselymonitoredduetothesignificant impactinpropertytaxrevenuesontheCitysGeneralFund. PersonalpropertyinCaliforniaissubjecttoabasiclevyequaltoonepercentoftheassessed value. Thepropertytaxsharecanfluctuatebetweencitieswithinacounty.TheCityofSan Clementereceives$0.153ofeachpropertytaxdollarcollectedwithintheCity.Thefollowing graphshowsthedistributionofthetotalpropertytaxlevyforeachpropertytaxdollarpaidfor theCity.

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FinancialTrendAnalysis

LTFP 2008

Thechartaboveshowstheportioneachrespectivegovernment agencyreceivesofthetypicalOrangeCountypropertytaxdollar.

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FinancialTrendAnalysis

LTFP 2008

ElasticRevenues (SalesTax,TransientOccupancyTax,LicenseandPermits,andCommunityDevelopment ServiceCharges)

Finding:WARNING.Elasticrevenues,asapercentageoftotalrevenues,showadecreasefromFY 200506toFY200607whichisthethirdconsecutivedecrease.Actualelasticrevenues decreased$179,665,whileoperatingrevenuesincreasedby$4.6million.Awarningratingis assignedduetoadecreaseinrevenueof$268,645incommunitydevelopmentservicecharges and$488,109fromlicensesandpermits;however,salestaxesincreasedby7.1%or$479,588. Comments:Elasticrevenues,asapercentageoftotalrevenues,decreasedfrom28.8%inFY 200506to25.8%inFY200607andisbelowthehistoricalaverageof31.0%fromFY199596to FY19992000.Thiswastheresultofa$268,645,or14%,dropincommunitydevelopment servicechargesandadropinlicensesandpermitsof$488,109,or14.9%.Awarningratinghas beenassignedbecauseofthedecreasesincommunitydevelopmentservicechargesand licensesandpermitsfromthepreviousyear.Detailsconcerningeachmajorelasticrevenue sourcecanbefoundinthefollowingpages.

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FinancialTrendAnalysis
SalesTaxRevenues

LTFP 2008

Finding:FAVORABLE.Assummarizedinthechartabove,salestaxrevenuesshowedanincrease of$479,588,or7.1%inactualdollarsoverthepriorfiscalyear.Inconstantdollars,theincrease amountedto$382,081,or6.5%,whichishigherthantheinflationrate. Comments:Assummarizedinthechart,salestaxrevenueshavegraduallyincreasedoverthe pastfiveyearsinactualandconstantdollars.Infact,actualdollarsincreased32.9%and constantdollarsincreased16.7%fromsalestaxrevenuesrecordedinFY200203.These increasesboostsalestaxrevenuetoaneighteenyearhighinactualdollarsandtheresultisa continuedfavorablerating.TheCityofSanClementesalestaxesareranked22ndoutof35 OrangeCountycities. ThechartbelowshowshowCaliforniaSalesTaxisdistributed:

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FinancialTrendAnalysis
LicenseandPermitRevenues

LTFP 2008

Finding:WARNING.Licenseandpermitrevenuesdecreasedinactualdollarsintheamountof $488,109or14.9%fromthepriorfiscalyear.Theconstantdollardecreaseregisteredat $432,528or15.4%fromFY200506.Thisindicatorreceivedawarningratingtoreflectthe changetoadownwardtrendinactualdollars. Comments:Whileconstructionpermitrevenuedecreased$558,626,or27.3%overthepast year,businesslicenseincomeincreasedfromtheprioryearby$66,741or6.3%.Awarning ratinghasbeenassignedbasedonthedevelopmentactivitydecreasecausingadownwardshift inelasticrevenues.ItshouldbenotedthattheCityprojectsdevelopmentalrevenues,suchas licenseandpermitfeesconservativelyduetothetimingofprojectsenteringthebuilding permitstagewhichcannotalwaysbepredictedaccurately.Althoughthesedecreaseswere anticipatedduringthemidyearadjustmentstheamountsforpermitswerebelowtheCitys originalanticipatedbudgetforFY200607.

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FinancialTrendAnalysis
CommunityDevelopmentServiceChargesRevenues

LTFP 2008

Finding:WARNING.Totalcommunitydevelopmentservicechargesdecreasedby14%,or $268,645fromtheprioryear.Thisrepresentsthesecondconsecutiveyearofdecreases.This trendisassignedawarningratingduetothedeclineindevelopmentastheCitynearsbuild out;thelevelingoftheservicecharges;andthepossibleeffectsoftherevenuefeestructure review. Comments:Othercommunitydevelopmentrevenues,suchasplancheckfeesandzoning applicationfeesaccountformostofthe$268,645decrease.Althoughthetotalactualamounts forcommunitydevelopmentservicechargesaregreaterthantheoriginalbudgetamounts,this differencewasstilllessthantheprioryear,duetotheCityapproachingbuildoutandthedelay oftheMarbleheadCoastaldevelopment.

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FinancialTrendAnalysis
IntergovernmentalRevenues

LTFP 2008

Finding:FAVORABLE.GeneralFundIntergovernmentalrevenues,asapercentageofoperating revenuesflattenedoutto2.2%inFY200607. Comments:Byanalyzingintergovernmentalrevenuesasapercentageofoperatingrevenues, theCitycandeterminetheextentofitsdependenceuponresourcesfromothergovernments. Excessivedependenceonthistypeofrevenuecanbedetrimentaltothefinancialhealthofthe CityasthefactorscontrollingtheirdistributionarebeyondtheCityscontrol.TheCityslargest intergovernmentalrevenueismotorvehicletaxwhichmakesup33%ofthetotal intergovernmentalcategory.Motorvehicletaxdeclinedin2004duetolegislativeactionthat transferredmotorvehiclefeestothestate.TheCityreceivespropertytaxdollarsinlieuofthe motorvehiclefeeswhichstartedinFY200405.Motorvehiclefeesreceivedasinlieuproperty taxestotaled$3.8millioninFY200506and$4.9millioninFY200607,whichwouldhavemade theintergovernmentalpercentages10.2%and11.8%,respectively,whichwouldstillhave supportingthefavorablerating.

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FinancialTrendAnalysis
OneTimeRevenues

LTFP 2008

Finding:FAVORABLE.Onetimerevenues,asapercentageoftotalGeneralFundrevenues, equaled2.12%inFY200607,aslightincreasefromtheprioryear. Comments:Onetimerevenuesincreasedby$264,941fromthepriorfiscalyear.FY200607 onetimerevenuesof$1.1millioninclude$920,246ofgrantfunds.Inaccordancewiththe CitysFiscalPolicy,onetimerevenuesarenotutilizedforoperatingexpenditures.Therefore, thisindicatormaintainsafavorablerating.

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FinancialTrendAnalysis
RevenueOverage

LTFP 2008

Finding:FAVORABLE.Actualrevenuesexceededbudgetby$1.9millionforfiscalyear200607 andendswithapositiverevenuepositionoverbudgetby3.85%.TheCityexperienced revenuesinexcessofbudgetintaxrevenueinthefollowingcategories:propertytaxes($1.5 million),salestaxes($0.3million),andtransientoccupancytaxes($0.2million).Thistrend continuestoreceiveafavorableratingsinceitmaintainsalevelabovetheICMAbasisofa shortageof5%ormoreforanunfavorablerating. Comments:Thistrendbeganthefiveyearanalysiswithapositiverevenuepositionof7.03% andendedFY200607at3.85%.TheCitycontinuestomonitoritsrevenuesthroughtheannual budgetandlongtermfinancialplanningprocessesinordertomoreaccuratelyforecastits revenues.ItshouldbenotedthattheCityprojectsdevelopmentrevenues,suchaslicenseand permitfees,conservatively,asthetimingofprojectsenteringthebuildingpermitstagecannot alwaysbepredicted.

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FinancialTrendAnalysis
Population

LTFP 2008

Finding:FAVORABLE.TheCityspopulationgrowth,anaverageof4.54%overthelastfiveyears, isconsideredfavorablebecausethisgrowthhasbeenplannedandcontrolled.Growthfrom 200506to200607was1.65%,whichindicatestheCitysgrowthpatterncontinuestoslow. Comments:Theexactrelationshipbetweenpopulationchangeandothereconomicand demographicfactorsisuncertain.However,asuddenincreaseinpopulationcancreate immediatepressuresfornewcapitalexpendituresandhigherlevelsofservice.Conversely,a rapiddeclineinpopulationallowsforasmallertaxbaseforspreadingCitycoststhatcannotbe reducedintheshortrun.TheplannedgrowthisallowingtheCitytheopportunitytoensure thatthecostofservicingnewresidentsdoesnotexceedtheCitysabilitytogeneratenew revenues,thatthelevelofbusinessactivitygrowsalongwiththeincreaseinresidential development,andthatthegrowthdoesnotstrainthesewersystemcapacity,trafficcirculation, andoffstreetparking.Additionally,increasedpopulationgeneratesincreasedexpenditures overtimesuchaspublicsafety(i.e.additionalfirestations,increasedpolice,etc.).

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FinancialTrendAnalysis
ExpendituresTrendAnalysis
ExpendituresPerCapita

LTFP 2008

Finding:FAVORABLE.Expenditurespercapitainbothchartsreflectanincreasewhenanalyzing actualandconstantdollarsforthepastfiscalyearwhencomparedtotheprioryear.Thistrend haschangedfromafavorable/cautionratingtoafavorableratingduetoexpenditureskeeping upwithgrowthoftheCity. Comments:Thefirstchartwhichincludesonetimeexpendituresshowsanincreasefrom$675 to$785inpercapitaactualdollarsandanincreasefrom$582to$673inpercapitaconstant dollars.Thisreflectstheincreaseinactualdollarsof$8.1millionandtheincreaseinconstant dollarsof$6.8millionwhencomparedFY200506.TheincreaseinactualdollarswasinCity general($6.3million),beaches,parksandrecreation($0.8million),police($0.5million),fire ($0.3million),andgeneralgovernment($0.2million).TheincreaseintheCitygeneralisdueto

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FinancialTrendAnalysis

LTFP 2008

aonetime$8.1millioncontributiontotheParksAcquisitionandDevelopmentFund,ofwhich $7.7millionwillgotowardthefurtherdevelopmentofLaPata/VistaHermosaSportsParkand $400,000isacontributiontoSteedMemorialPark.Theotherportionoftheincreaseis primarilyduetoanincreaseinbeaches,parksandrecreationservicesinFY200607by$.8 millionmainlytofundincreasedcontractualactivitieswhicharenotoffsetbyrevenues.The increaseof$836,225or5.5%inpoliceandfireexpendituresisduetonegotiatedincreasesas partofthepoliceandfirecontractswiththeCountyofOrange. Thesecondchart(whichexcludesonetimeexpenditures)showsanincreaseinactualdollars from$538to$571andanincreaseinconstantdollarsfrom$624to$665.Theapproachof excludingonetimeexpendituresisarealisticapproachsincetheCityappliesonetime expenditurestoonetimerevenuesinaccordancewiththeCitysFiscalPolicy.

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FinancialTrendAnalysis
ComparisonofExpendituresbyFunction 200203vs.200607
Beaches, Parks& Recreation 20% 200203 General Government 14%

LTFP 2008

Community Development 28%

PublicSafety 38%

Finding:FAVORABLE.Expendituresbyfunction,asapercentageofthetotalGeneralFund expenditures(excludingdebtservice,interfundtransfers,andcapitaloutlay),didnotchange significantly. Comments:Thesechartsindicatethatmostexpenditurecategorieshaveremainedstable,with onlyminorincreasesanddecreasesinpercentages.Beaches,ParksandRecreationwhile experiencingexpendituregrowthhasalsoexperiencedgrowthinclassrevenues.Community DevelopmentdecreaseisduetotheslowingofdevelopmentastheCitynearsbuildout.

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FinancialTrendAnalysis
ComparisonofExpendituresbyCategory 200203vs.200607

LTFP 2008

Comments:ThechartsaboveindicatethattheContractualServices,Personnel,andInterfund expenditurecategories,asapercentageofthetotalGeneralFundexpenditures,changed betweenFY200203andFY200607. Thecontractualcategorychangedfrom53%to40%.Althoughtherewasagrowthinpublic safetycontractualcostsfromFY200203,increasesininterfundpaymentscausethe contractualcategorytobealowerpercentageofexpendituresinFY200607thaninFY2002 03. Interfundamountshaveincreasedduetoonetimereservetransfersincreasingfrom$7.0 millioninFY200203to$8.1millioninFY200607.TheCitytransferred$8.1million contributiontotheParksAcquisitionandDevelopmentFund,ofwhich$7.7millionwillgo towardthefurtherdevelopmentofLaPata/VistaHermosaSportsPark.Iftheseinterfund

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FinancialTrendAnalysis

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transfershadnotbeenincludedinFY200607,contractualserviceswouldhaveincreasedin percentagefromFY200203to55%whileinterfundamountswouldhavedecreasedto11%. Thepersonnelcategorydecreasedfrom27%to25%ofexpenditures.Personnelcostsasa percentageoftotalexpenditureshavedecreasedfromfiveyearsago.Thesecostsareanalyzed inmoredetailintheEmployeesperCapitatrendandtheFringeBenefittrend.Thesetrends showthatemployeegrowthremainedstablewithpopulationgrowthandfringebenefitscosts overthelasttwoyearshavestabilizedduetoretirementcontributionpercentageslevelingover thelasttwoyears. EmployeesPerCapita

Finding:FAVORABLE.Employeespercapitahaveremainedrelativelystableoverthelastfive years;however,ithasincreasedslightlyfromFY200506duetoaslightincreaseinthenumber ofemployeesandapopulationincrease. Comments:ThisindicatorisawardedafavorableratingasgrowthinFullTimeEquivalents (FTEs)keepupwithserviceleveldemands.Thistrendwillbecloselymonitoredtoinsurethe Citysabilitytosupportcurrentandfutureservicelevels.

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FinancialTrendAnalysis
FringeBenefits

LTFP 2008

Finding:FAVORABLE.Fringebenefits(includingsocialsecuritybenefits),asapercentageof GeneralFundsalariesandwages,decreasedslightlyfrom40.7%to40.1%.Fringebenefits (excludingsocialsecuritybenefits)showacorrespondingdecreasewhencomparedtoFY2005 06.Thisindicatesalevelingoffringebenefitcostsresultinginafavorablerating. Comments:ThelargestcomponentofthebenefitpercentageisthecontributiontotheCitys definedbenefitretirementprogram.Theretirementcontributionamounthasincreased,but thepercentofpayhasremainedflatduetoastableinterestrateenvironment.Anotherbenefit changeresultedfromthe200304negotiationswiththeCityemployeeswhichincreased medicalbenefitcostsfortheCityinFY200405.However,inFY200506theamountwas capped.Inaddition,workerscompensationrateshavedecreasedfromtheprioryear, althoughthesechangesresultedinonlyasmallportionofthebenefitpercentagechange.

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FinancialTrendAnalysis
CapitalOutlay

LTFP 2008

Finding:FAVORABLE.Capitaloutlayexpendituresincreasedby$1.3million,or34.5%,fromthe 200506fiscalyear.Capitaloutlayexpenditurestotaled$1.6million. Comments:Spendingoncapitaloutlayhasincreasedduetoseveralmaintenancecontractual servicesaccountsandprojectsintheGeneralfundbeingmovedfromthecontractualservices accountcategorytothecapitaloutlaycategoryduringtheFY07/08budgetprocesstobetter reflectcapitalwithregardstomaintenanceandcapitalstudiesintheGeneralfund. TheCapitalEquipmentReplacementReservewasestablishedinFY199495.Thisreservefund willensurethatobsoleteandwornequipmentisreplacedinaccordancewiththeCitys preventivemaintenanceprogram.Thistrendreceivesafavorableratingforthetwelfth consecutiveyearbecauseofthecontinuedcommitmenttoupgradingcapitalassets,which improvestheefficiencyofCityoperations.

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FinancialTrendAnalysis
OperatingPosition

LTFP 2008

Finding:FAVORABLE.Anoperatingsurplusiswhenrevenuesexceedexpenditures,conversely whenexpendituresexceedrevenuesthereisanoperatingdeficit.FY200607finishedwithan operatingsurplusof11.5%,anincreasefrom2.8%,whencalculatedasapercentageofGeneral Fundrevenues. Comments:TheCityendedFY200607withanoperatingsurplus.Theexpendituresusedto calculatethissurplusdoesnotincludeaonetimecapitalcontributionof$8.1milliontothe ParksAcquisitionandDevelopmentFund,ofwhich$7.7millionwillgotowardthefurther developmentofLaPata/VistaHermosaSportsPark.Thistrendreceivesafavorableratingdue tothepositiveoperatingpositionandcontinuedincreaseinrevenues.

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FinancialTrendAnalysis
DebtService

LTFP 2008

Finding:FAVORABLE.GeneralFunddebtservicereceivesafavorableratingasithasremained immaterial(lessthan1%)incomparisontototalrevenuesoverthelastelevenyears.Credit ratingfirmsgenerallyviewdebtserviceasunfavorableifdebtservicepaymentsexceed20%of netoperatingrevenues.Standard&Poors,anindependentfirmthatissuesratings,reaffirmed theCityofSanClementescreditratingofAAin2005. Comments:TheCitysdebtservicecostwasduetothepayoffoftheoutstandingbalanceofits capitalizedleasewithCityNationalBankforthepurchaseofenergyefficiencyequipmentfor severalCitybuildingsin200304.Theleasewasnotdueuntil2006butwaspaidoffearlyasa moneysavingmeasure. Additionally,itshouldbenotedthatthedebtservicefortheNegocioBuildingbonds,theCitys streetassessmentbonds,andcapitalequipmentleasesareaccountedforinaseparatefunds, andarenotpartofthisanalysis.

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FinancialTrendAnalysis
AccumulatedCompensatedAbsences

LTFP 2008

Finding:FAVORABLE.Thisindicatorreceivesafavorablerating,consistentwiththeprioryear. TheCitysaverageannualpaymentsforterminatedemployeesaccumulatedcompensated absencesamounttoonehalfoftheaccruedleavereservebalance.Whiletheaccumulated compensatedabsenceshaveshownincreasesoverthelastfiveyears,thereserveiscontinually fundedtoinsureanadequatereserve,asoutlinedintheLongTermFinancialPlansReserve section. Comments:AtJune30,2007,thebalanceoftheliabilityforcompensatedabsenceswas$2.08 millionconsistingof$1.1millionforvacation,$0.9millionforsickleave,and$74,000for compensatorytime.Thisisanincreaseof$153,558,or7.9%fromtheprioryearsliabilityof $1.9million.TheincreaseisduetoanincreasenumberofCityemployeesintheGeneralFund andanincreaseof3.75%forcostoflivinginFY200607. TheAccruedLeaveReservewasestablishedtopayaccruedemployeebenefitsforGeneralFund employeeswhoterminateduringtheyear.InFY200607,theGeneralFundcontinuedits annualcontributiontotheAccruedLeaveReserveFundwithanamountof$230,000forthe paymentofaccruedleaveforterminatedemployees.AsofJune30,2007theAccruedLeave Reservebalancewas$486,261.

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FinancialTrendAnalysis
FundBalance

LTFP 2008

Finding:FAVORABLE.Unreservedfundbalancereferstothosedollarsavailableforuseinthe eventofafinancialemergency,shorttermrevenuefluctuationsoraneconomicdownturn.The Cityattemptstooperateeachyearatasurplustoensurethemaintenanceofadequatereserve levels. Comments:Unreservedfundbalanceexcludinglongtermreceivablereservesdeclined12.3% inFY200607asapercentageoftotalrevenues.AlthoughtherewasadecreaseinFY200607, thestablepositionoftheCitysGeneralFundisdisplayedbyyearsoflargeunreservedfund balancesasapercentageofoperatingrevenues. CityCounciladoptedafiscalpolicyrequiringthatemergencyreservesbesetat8%ofGeneral Fundoperatingexpenditures.IncludedwithinthetotalFY200607unreservedfundbalancesof $19.0millionareundesignatedfundsof$15.5millionanddesignatedfundsof$3.5millionfor theGeneralFundEmergencyReserve.Theannualcontributiontotheemergencyreserveis discussedindetailintheReserveAnalysissectionoftheLTFP.Inaddition,theunreservedfund balancehasbeenusedtosupportonetimeprojects/costsandreservetransfers. ThefollowingtablesummarizestheGeneralFundyearendundesignatedfundbalanceandthe amounttransferredfortheLaPata/VistaHermosaSportsParkProjectduringthepastfivefiscal years:
FiscalYear 200203 200304 200405 200506 200607* GeneralFundBalance (undesignated) $14,408,404 $16,862,480 $21,146,531 $18,296,959 $15,475,231 Amounttransferredto project $61,562 $7,650,000

*TheFY200607actualendingfundbalanceexceededtheprojectedendingfundbalance amountof$12,718,242by$2,756,989.

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FinancialTrendAnalysis
LiquidityRatio

LTFP 2008

Finding:FAVORABLE.InFY200607,theCitysliquidityratioremainspositiveat6.2:1.Credit ratingfirmsconsideraratioof1:1favorable.TheCitys6.2:1currentassettocurrentliability ratioisconsideredexcellent. Comments:LiquiditymeasurestheCitysabilitytomeetshorttermobligations.Liquidityis measuredbycomparingcurrentassetstocurrentliabilities.Currentassetsincludecash,short terminvestments,accountsreceivableandotherassetsthatcanbereadilyconvertedtocash. Currentliabilitiesincludeaccountspayable,accruedwages,accruedexpensesandall obligationsthatcanbeimmediatelydemandedforpayment.

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